Several months ago we wrote about the practice of zeroing, which is essentially a means of calculating an import duty by zeroing (tossing out, really) examples of imports in which the domestic price is lower than the import price. Because those examples are tossed, the ITA levies duties based on the calculations of the remaining examples within their review. Our previous post explains in detail the methodology behind the practice of zeroing. In May, the WTO ruled against the practice, used exclusively by the United States and earlier this month, ruled against the US on appeal. The US stopped using the practice of zeroing back in December 2006.
The case centers on steel imports from Japan. The new ruling will allow Japan to bring trade sanctions against the US. And here is the catch: “The retaliatory sanctions will equal $250m in the first year,” according to this article, and will be imposed on other goods for which the US exports to Japan (the original case involved the import of Japanese ball bearings). We have long argued that many anti-dumping cases and protectionist measures end up creating more harm than not. It would be a shame if these retaliatory measures harm American exports of other value-add products, particularly during a weakened economic environment.
Japan alone did not pursue the case. China, South Korea, Mexico, Hong Kong, Taiwan and Thailand all supported Japan. Unfortunately, this WTO case represents but one action. We will cover several additional trade cases involving metals in future posts.
Are protectionist measures really on the rise, or are we just sounding unnecessary alarm bells? We’ll let you decide, but now a Global Anti-dumping Database run by the World Bank tracks anti-dumping cases. Take a look at these statistics from the link below:
The count of newly imposed protectionist policies like anti-dumping duties and other safeguard measures increased by 31% in the first half of 2009 relative to the same period one year ago, which itself is not an alarming number. But many governments take more than a year to make final decisions on such policies after receiving the initial request for protection from a domestic industry….And with the recession continuing, requests for new import restrictions were 19% higher in the first half of 2009 relative to 2008, according to the author of a Wall Street Journal article on the subject and himself an organizer of the database.
There is more to follow on this topic.